Our industry has consistently opposed the FCA’s proposals to introduce a new public interest test as the basis for naming firms under investigation. We appreciate the FCA’s engagement with us and others across the industry since the proposals were originally published.
Some of the issues the industry has raised during this consultation process have been heard, including the factors behind the public interest test, removing retrospection, lengthening the period of notice, and confirming how any decisions would be taken. However, there has been little change in other key areas. Ultimately, the FCA’s approach would leave the UK as a global outlier.
We believe that the introduction of a new, broad public interest test in place of the narrower exceptional circumstances test is unnecessary and would increase the culture of regulatory uncertainty which our members report is already proving damaging to the UK’s competitiveness.
There are alternative approaches that could be taken, which would support the FCA's key objectives on enforcement while avoiding these unintended but harmful consequences including:
- Retaining and refining the exceptional circumstances test: The FCA’s existing framework already allows for announcements about investigations. We believe there is sufficient flexibility within the wording of the existing test for the FCA to make the incremental change it is seeking, without needing to replace it with a new public interest test.
- We also think there is a case to introduce new, specific circumstances in which the FCA can reactively confirm the existence of investigations. For example, in cases where the firm itself has made an investigation public, or where another enforcement agency has already legitimately done so. These situations do not fall under the current ‘exceptional circumstances’ test but could be set out simply and clearly, with the appropriate safeguards suggested in our response.
- Sharing anonymised information on enforcement activity: Regular anonymised updates, similar to the FCA’s Market Watch publication, would provide insight into the FCA's enforcement activity, including the nature of firms, sectors and issues involved, without the damage that would be caused by naming individual firms prematurely. We strongly support the introduction of such a publication.
- Focusing on areas where most enforcement activity occurs: Public notifications should focus on the harmful activities of unregulated firms and regulated firms operating outside the regulatory perimeter. Around 60 per cent of outstanding enforcement operations are accounted for by such activities. Redoubling efforts in these areas would tackle consumer harm while protecting reputable, regulated firms.